Greece isn't going to get out of its current debt and economic crisis without writing down some of its debt. At more than one and a half times its GDP, Greece isn't going to save its solvency by slashing its public sector and condemning itself to years and years of low wages and anemic growth.
This is the fatal catch for a country that issues sovereign debt on the basis of its own credit rating but doesn't control its own currency. It can be hammered by the capital markets, even if they aren't burdened with excessive debt, as Greece actually was and is.
This is an Aljazeera English report on Greek protest dated 05/10/2011:
The cynical Big Capital perspective is that Greece just needs to keep biting the bullet and drive more and more of its people into hardship and poverty. Veit Sorger, the President of the Austrian Industrial Association declared, as summarized by the Oberösterreichische Nachrichten (Sorger für Solidarität mit Griechenland 17.05.2011), "Griechenland braucht zur seiner Schuldenkrise Solidarität und eiserne Disziplin bei Einhaltung der Sparziele." (Greece needs solidarity and iron discipline in holding to its savings goals in order to cope with its debt crisis.)
What that translates to in practice is that Greece is imposing an economic austerity program while employment stands at 16% rate. Austerity will restrict economic growth, which means that it will be even longer until economic growth itself reduces the national debt percentage to a more manageable rate.
Austerity includes selling off some state-owned enterprises like energy and waterworks - the same kind of austerity program the Washington Consensus demanded in other crises of developing countries struck by capital market attacks and put under the neoliberal demands of the IMF and the World Bank. The Grrek sell-off is a requirement for the next tranch of financial assistance.(See Athen lenkt ein: Jetzt folgt der Ausverkauf and Tafelsilber Oberösterreichische Nachrichten 17.05.2011) This will offer new profit opportunities for the purchasers. Whether it will benefit Greek consumers or maintain democratic influence over those interprises is far less likely.
People in Greece, Spain, Ireland and Portugal have good reason to question whether participation in the euro currency - and even in the EU - can be expected to bring them more benefits than harm.
In one sense, the current crisis of the euro and the European Union is a success of American foreign policy. The United States has generally been supportive of the European unity project. The US knew it had the potential to strengthen western European solidarity and thereby reduce the chance of war among European nations.
After the collapse of the Soviet bloc, the US under the Bush 1 and Clinton Administration's encouraged the expansion of the EU. But the US preferred fast expansion with loose integration. The US tended then to see the EU as kind of a welfare project for the new democracies in central and eastern Europe. And there was the very real effect that the desire to be EU members was a strong encouragement for those countries to meet the high EU standards for democratic governance and the rule of law. The standards are genuinely high. The United States wouldn't meet them because of its use of the death penalty, the highly dubious Supreme Court selection of the President in 2000, the massive financial corruption of politics, the use of torture and the "war on terror" claims of Executive power for warrantless spying, indefinite detention of terrorist suspects without trial, and even the claim of a Presidential power to order the assassination of American citizens suspected of terrorist connections.
But the US favored a weak version of the EU, in which it was faithfully supported by the subservient Britain. In classic Realist foreign policy terms, this was an entirely rational approach. (At least for the United States; -Britain's rationality in the matter is another issue.) The "world hegemon" would be expected to actively discourage the rise of any "peer competitor" such as the EU could potentially become. Encouraging rapid EU expansion under conditions of relatively loose association served that purpose well.
Now the working people in the weaker economies of the EU are paying the piper for that course of action.
Tags: eu, european union, greece, neoliberalism
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